Cyberonics net sales increase 13% to $53.7M for second quarter 2012

Cyberonics, Inc. (NASDAQ: CYBX) today announced results for the quarter ended October 28, 2011.

Quarterly highlights

Operating results for the second quarter of fiscal 2012 compared to the second quarter of fiscal 2011, and other achievements include:

• Net sales of $53.7 million, a 13% increase from $47.5 million;
• International sales increased by 20% on a constant currency basis;
• Income from operations of $15.1 million, an increase of 18%;
• Adjusted EBITDA of $19.0 million, an increase of 23%;
• Income per diluted share of $0.32 cents, an increase of 28% from an adjusted income per diluted share last year of $0.25 cents;
• ImThera Medical, Inc. (Obstructive Sleep Apnea) investment;
• One million share repurchase completed.

As discussed below under "Use of Non-GAAP Financial Measures," the company presents in this release certain non-GAAP financial measures: adjusted net income, adjusted income per diluted share and adjusted EBITDA.  Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.  Please refer to the attached reconciliation between GAAP and non-GAAP financial measures.

Results and objectives

"In fiscal 2012, our sales team continues to deliver record sales," commented Dan Moore, Cyberonics' President and Chief Executive Officer.  "We are pleased with the continued overall rebound in our international business, led by significant growth in Europe.  The U.S. epilepsy sales team produced solid results, which, following the voluntary withdrawal of the AspireHC™ generator early in the quarter, demonstrates both the quality of our team and the underlying market potential.  We estimate that average quarterly growth in U.S. new patients over the last year exceeded 6%.

"International net sales increased to $8.6 million from the $7.0 million recorded in the comparable quarter of fiscal 2011, an increase of 23%.  On a constant currency basis, the increase in sales was 20%, reflecting the excellent performance in Europe and consistent with the 22% constant currency increase in international net sales reported for our first quarter.

"Operating cash flow for the quarter totaled $21.7 million, an increase of 33% over the comparable period last year.  Available cash at period end was $70 million, following the significant investments of $33 million during the quarter in stock repurchases, ImThera Medical and the purchase of our corporate headquarters building.

"Our growth expectations for both sales and operating income for the fiscal year are improved, and we have increased our guidance as a result.

"Our product development and quality teams implemented design changes to the AspireHC™ generator and submitted them for approval in both the U.S. and Europe. We continue to expect filings to support the resumption of the AspireSR™ generator E-36 European clinical trial to occur by the end of the fiscal year.  Further, the recent announcement concerning an expanded MRI approval from the U.S. Food and Drug Administration follows many years of effort by our product development team.

"We are pleased to announce that Mark Verratti is now responsible for Global Sales, and that Sherrie Perkins has been appointed as Vice President, Marketing & New Business Development. Mark has led our U.S. sales team since 2007 and was promoted to Vice President, Sales – The Americas, Asia and EMMEA earlier this year. Sherrie has skillfully managed our New Business Development activity for three years and has served in a number of roles of increasing responsibility, including head of our depression marketing group, during her 11 years with the company."

Share repurchase update

During the quarter, we repurchased approximately 654,000 shares of common stock on the open market, completing the repurchase of one million shares as authorized by the Board on June 6, 2011. This week, the Board authorized the repurchase of an additional one million shares.

Fiscal 2012 guidance

Cyberonics is increasing net sales guidance for fiscal year 2012 to a range from $213 million to $216 million from the previously provided range of $212 million to $215 million.  The company now expects that income from operations for fiscal year 2012 will be in the range from $55 million to $58 million, an increase from the prior guidance of $54 million to $57 million.